HSBC announces 35,000 job cuts while profits plunge

Andrew Cummings
February 18, 2020

HSBC's management ranks face uncertainty over jobs and pay in the lender's most radical overhaul in years, as it seeks to slash almost $5 billion in costs and prune its underperforming investment bank.

HSBC, which makes the bulk of its revenue in Asia, reported annual profit before tax of $13.35bn (£10.3bn).

The lender said on Tuesday it had cut its bonus pool for 2019 by 4% to reflect poor performance and warned its investment bank will take a hefty proportion of the around 35,000 job cuts it expects over the next three years - many at its headquarters in London's Canary Wharf financial centre.

In the USA, where returns have lagged the Asian operations for years, HSBC said it would cut the retail branch network by nearly one-third and move fixed-income trading to London, reducing operating costs by as much as 15%.

Most analysts had pencilled somewhere in the region of 10,000 job losses but as many as 35,000 are expected to go over the next three years, equivalent to roughly 15pc of the workforce.

The radical overhaul comes as HSBC streamlines operations in the United States and Europe, although no details were given on where the axe would fall.

The bank, which has long underperformed rivals, is seeking to become leaner and more competitive as it tries to grapple with a swathe of challenges: slowing growth in its major markets, the coronavirus epidemic, Britain's withdrawal from the European Union as well as lower central bank interest rates. "However, parts of our business are not delivering acceptable returns", said interim chief executive Noel Quinn.

"Our immediate aims are to increase returns, create the capacity to invest in the future, and build a platform for sustainable growth", Quinn said in the statement. "We have already begun to implement this plan, which my management team and I are committed to executing at pace".

While strengthening its investment banking capabilities in Asia and the Middle East, the bank will maintain a global investment banking hub in London, reducing its European footprint for the business.

HSBC addressed the impact of coronavirus on the bank.

The restructuring plans are the biggest shake-up since 2012, when HSBC was caught up in a Mexican money laundering scandal. The remainders include two were "partly on track" - growth in its worldwide network and simplification of the organization coupled with investment in future skills - the "off track" priority of turning around its US business and achieving 6 percent return on tangible equity by 2020.

In the USA, the bank said it planned to reduce its branch network by around 30 per cent, consolidate back and middle office activities and lower operating expenses by 10-15 per cent.

The bank will also reduce its sales and research coverage in European cash equities with a focus on supporting equity capital market transactions, it said. It, too, was a pivot to Asia, with the bank planning to reduce assets allocated to less profitable markets such as Europe and the USA, and use the freed-up capital to bulk up in fast-growing Asian economies. Overall, the bank said it hoped to achieve a lower adjusted cost base of US$31 billion or below in 2022.

It also reported a loss before tax of Dollars 3.9 billion in the fourth quarter of 2019.

Even in Hong Kong, which was battered by months of seething pro-democracy protests a year ago, the banking giant posted a five per cent increase in adjusted pre-tax profit to US$12.1 billion.

Other reports by iNewsToday